Should You Outsource Your Accounting Function?
Outsourced accounting functions are becoming a much more common solution in today’s fast-changing world. Within the past year alone, major tax reform has been passed and individual states have modified sales tax laws in light of the Wayfair vs. South Dakota Supreme Court decision. Additionally, privately-held companies are starting to feel the pain associated with the implementation of new financial accounting standards over revenue and leasing transactions. All of these changes will ripple through how businesses account for and record their daily transactions.
Outsourcing the accounting function can reduce the time and energy spent by management addressing these changes, allowing them to allocate their resources to the activities that will have the greatest impact on the bottom line. But outsourcing isn’t necessarily right for every company. Below are just a few of the pros and cons when considering outsourcing for your business.
PRO: More time for strategic activities. Many owners find their most experienced people are too deeply involved in recording the company’s day-to-day transactions. While the time spent on these tasks may not seem like a lot of time at first, it can increase significantly as the business grows. By outsourcing accounting functions, owners and senior management are now free to focus on more strategic business issues such as acquiring new customer, expanding product or service, or developing the next generation of leaders.
CON: It may be cost-prohibitive. Outsourcing of any kind should be viewed as an investment and not an expense. Depending on the stage of your business and resources available, costs associated with outsourcing may outweigh benefits at the present time.
PRO: More accurate and timely data. Financial information is only as good as the quality of the supporting people and processes. Outsourcing to highly qualified professionals usually gives owners greater confidence in the accuracy of the business reporting. In addition, business owners often find that outsourcing the accounting function results in more timely financial reports.
CON: Your business may benefit more from an FTE. At some point in a business’s life cycle, there may come a time when full-time personnel start to make more sense, such as when increases in business complexity result in substantial increases in the complexity of business reporting.
PRO: Higher-level talent at a lower cost. Individuals who work as outsourced financial professionals often have a much broader background and deeper level of experience that they can bring to the table. Since the outsourced function is usually only needed on a part-time basis, a business owner is able to tap that individual’s expertise and get a higher level of insight into their company, relative to the cost of having a less experienced person on-staff full-time.
CON: Outsourcing is not one-size-fits-all. Outsourcing may not be right for every business. Specialized industries with niche requirements may be better off having dedicated employees who can be trained on the specific needs of the company.
Finally, owners have a range of options available to them when considering an outsourced solution—from a fully outsourced department to a hybrid approach involving the use of low cost full time staff augmented by external professionals. By tailoring an approach to fit the unique needs of your business, you can drive improvements in timeliness, quality and cost, while also gaining access to experienced business advisors.
Steven E. Staugaitis CPA, CVA Director, Audit & Accounting, Kreischer Miller may be reached at sstaugaitis@kmco.com or 215.441.4600. Kreischer Miller is a leading independent accounting, tax, and advisory firm that serves the Greater Philadelphia and Lehigh Valley areas.